Routes, berths and hulls judged together

I review every route each year on four measures kept on one page: contribution after fuel and crew, berth hours consumed, vessel-years tied up, and the alternatives a community would have if we left. The fourth measure is not sentiment. Islands with no other operator create obligations to the maritime regulator and to local governments, and the reputational cost of leaving one abruptly reaches routes that are still profitable. A route moves onto a watch list when its contribution has been negative for two years, or when its vessel faces a decision the route cannot pay for. From there the options are written out in full: repricing, a smaller ship, fewer sailings, a handover to another operator or an exit. I want the board to see why each alternative was rejected, not only the one we recommend.

Many island ports belong to provinces or municipalities whose elected leaders serve three-year terms. A terminal partnership has to survive that cycle, so I design for it from the start. That means plain revenue-sharing formulas the next administration can audit, access rules that rival operators can read, and a joint committee that deals with congestion before it becomes a political complaint. I also separate what we fund from what the government contributes, usually land, an existing pier and permits, so that neither side later claims the other's assets. The commercial temptation is to ask for exclusivity in return for capital. I have learnt to price the risks exclusivity attracts: challenge, resentment and a weaker hand at renewal. A shared berth with written priority windows has usually been worth more to us over twenty-five years.

Much of the Philippine inter-island fleet was built for owners in other countries, and second-hand tonnage remains the cheaper way to add seats. I compare used and new vessels over the period we expect to own them, not on purchase price. The comparison includes docking and steel renewal as hulls age, fuel per crossing, crew numbers, spares, peak-season capacity and the resale or scrap value at the end. It also includes what each choice prevents. A larger used ship may fit a ramp badly or tie a corridor to one fuel profile for fifteen years. I work with our technical director and chief engineers on specifications, and their judgement on maintainability has changed my recommendations more than once. Lower fuel use is the main decarbonisation lever open to us now, so I present it as a cost and emissions decision together.

Smaller family ferry companies approach us when a founder retires, a vessel fails its survey or a loan becomes difficult. Their attraction is usually route rights and terminal slots rather than ships. I start diligence with the ships anyway: hull condition, survey history, crew certification and incident records, because a route licence is worth little if the vessel serving it cannot sail safely. I then test whether the routes would add contribution once our own costs and timetable apply, and whether combining services would leave a community with less choice than regulators and local governments will accept. I have recommended walking away more often than buying. When a deal fails, I look for the narrower benefit, such as hiring experienced seafarers or taking over a single crossing the seller is leaving.

Our demand is uneven. Holy Week, the Christmas weeks and regional festivals can double bookings on some corridors, while typhoon signals stop sailings altogether for days at a time. I model the network on those weeks as well as on the average, because capacity decisions made on annual load factors understate the cost of turning passengers and trucks away. A reserve vessel kept for peaks earns little for most of the year, and I make that cost explicit rather than hiding it in fleet overhead. I also study cancellation patterns with our operations team, who decide when it is unsafe to sail. Strategy does not override those calls. Its job is to leave the fleet and timetable enough room to recover after a storm without stranding cargo for a week.